Failure to maintain Register of Charges in Form No. CHF-7 – MCA imposes 10.50 Lakh Penalty
Introduction: The Ministry of Corporate Affairs in India has enforced stringent measures against Holitech India Private Limited due to its non-compliance with Section 85(1) of the Companies Act, 2013. The company is confronted with a penalty of ₹5.00 Lakh for its failure to maintain accurate records in the register of charges, as stipulated by the law. Additionally, 11 directors have been individually fined ₹50,000 each, resulting in a cumulative penalty of ₹10.50 Lakh. This article delves into the details of the company’s violation, the imposed penalties, and the repercussions of the non-compliance.
1. Background: The company, registered on 11.04.2018, came under scrutiny following directives from the Directorate and the Ministry regarding an inquiry under Section 206(4) of the Companies Act, 2013.
2. Inquiry Findings: The inquiry revealed that Holitech India failed to maintain its register of charges properly, specifically omitting details related to the creation and satisfaction of charges on multiple occasions.
3. Show Cause Notice: A show cause notice was issued to the company and its officers, but no response was received. The lack of communication and compliance raised concerns about the company’s adherence to statutory obligations.
4. Penalty Imposition: Considering the gravity of the non-compliance, the Adjudicating Officer imposed a penalty of ₹5,00,000 on the company and ₹50,000 on each director under Section 86(1) of the Companies Act, 2013.
5. Payment Deadline: The noticee is directed to pay the penalty within 90 days of receiving the order, with the amount to be submitted via Demand Draft in favor of “Pay & Accounts Officer, Ministry of Corporate Affairs, New Delhi.”
6. Appeal Process: The company has the option to appeal the order within sixty days of receipt, following the prescribed procedure and addressing the Regional Director.
7. Consequences of Non-Compliance: Non-compliance with the order may lead to further consequences, as stipulated in Section 454(8) of the Companies Act, 2013.
Conclusion: Holitech India Private Limited and its directors find themselves in a challenging situation as the Ministry of Corporate Affairs imposes a substantial penalty for their failure to adhere to the statutory provisions outlined in Section 85(1) of the Companies Act, 2013. The importance of maintaining accurate records, especially in the register of charges, cannot be overstated, and this case serves as a stark reminder of the consequences that may follow neglecting such obligations in the corporate landscape.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
OFFICE OF REGISTER OF COMPANIES,
37/17, Westcott Building, The Mall,
Phone : 0512-2310323/2310443
NO.07/01/ADJ-85(1)/ HOLITECH INDIA PRIVATE LIMITED/5454
ORDER FOR VIOLATION OF SECTION 85(1) OF THE COMPANIES ACT, 2013 READ WITH RULE 10 OF COMPANIES (REGISTRATION OF CHARGES) RULES, 2014 AND COMPANIES (ADJUDICATION OF I’ENALTIES) RULES, 2014. & COMPANIES(AMENDMENT) Act 2020)
IN THE MATTER OF M/s. HOLITECH INDIA PRIVATE LIMITED
1. The Ministry of Corporate Affairs vide its gazette notification no A-42011/112/2014-AD 11 dated 24.03.2015, has appointed the undersigned as Adjudicating Officer in exercise of the powers conferred by section 454 of Companies Act, 2013 (hereinafter known as Act) read with Companies (Adjudication of Penalties) Rules,2014 under the provisions of this Act.
2. Whereas the Company M/s HOLITECH INDIA PRIVATE LIMITED has been registered under the provisions of Companies Act on 11.04.2018, and is having its registered office situated at Plot No. 67, Ecotech-1 Extension- 1, Greater Noida, Gautam buddha Nagar, Greater Noida, Uttar Pradesh, 201310. The authorized capital of the company is Rs. 1,00,00,00,000/-
3. The Directorate vide its letter no. Inq./Guard/2021/10971 dated 17.12.2021 and Ministry’s letter F.No. CL-II-08/13 /2021-DGCoA-MCA dated 13.12.2021 directed to conduct the inquiry u/s. 206(4) of the Companies Act, 2013. The Inquiry Officer (10) sought information and documents (Certified copies of all statutory Registers required to be maintained under Companies Act, 2013 since incorporation) from the Company under Section 2060) of the Companies Act, 2013 vide letter no. 01/39/Inquiry/Holitech/2021/2380 dated 24.12. 2021.. The Company had furnished partial reply vide letter dated 04.0 I .2022 in which the register of’ charge as provided by the Company with its reply was not maintained properly as details pertaining to creation of charge of Rs. 1,00,000,000/- on 08.11.2020 was not recorded in the register. Further, satisfaction of three charges on 14.12.2020 which were created on 01.07.2019 also not recorded in the register. The Regional Director vide its letter dated 14.07.2022 has accorded the sanction to take action on the basis of Inquiry report dated 11.07.2022 in which said non-compliance was reported. Thus, it is evident that the company and its Directors have failed to comply with the provisions of section 85( 1) of the Companies Act, 2013 read with Rule 10 of Companies (Registration of Charges) Rules, 2014. And are thus liable for penal provisions.
3. Accordingly, a Show Cause Notice No.. 07/01/Adjudication-85(1)/ HOLITECH INDIA PRIVATE LIMITED /4779-4790 dated 10.10.2023 was issued to the company and its officers in default under section under Section 85( 1) of the Companies Act, 2013 read with Rule 10 of Companies (Registration of Charges) Rules, 2014, and with Companies (Adjudication of Penalties) Rules, 2014 by this office. This office has not received the said letter undelivered also.
4. The company and its officers in default have failed to furnish any reply to the said Show Cause Notice, hence no hearing was fixed for this matter.
5. Further, neither any representative of the company nor its directors have either furnished their reply or have appeared before the undersigned which has further strengthened the apprehension that the company and its Directors have failed to comply with the provisions of 85( 1) of the Companies Act, 2013 read with Rule 10 of Companies (Registration of Charges) Rules, 2014, in maintaining details pertaining to creation of charge and satisfaction of charges in the register of charges, thereby attracting the penal provisions mentioned under Section 86(1) of the Act.
Provisions of the Act: –
Section 85(1) of the Companies Act, 2013 read with Rule 10 of Companies (Registration of Charges) Rules, 2014 provides that: ‑
“Every company shall keep at its registered office a register of charges in such form and in such manner as may be prescribed, which shall include therein all charges and floating charges affecting any property or assets of the company or any of its undertakings, indicating in each case such particulars as may be prescribed: Provided that a copy of the instrument creating the charge shall also be kept at the registered office of the company along with the register of charges…”
Rule 10 of Companies (Registration of Charges) Rules, 2014: –
(I) Every company shall keep at its registered office a register of charges in Form No. CHG.7 and enter therein particulars of all the charges registered with the Registrar on any of the property, assets or undertaking of the company and the particulars of any property acquired subject to a charge as well as particulars of any modification of a charge and satisfaction of charge.
(2) The entries in the register of charges maintained by the company shall be made forthwith after the creation, modification or satisfaction of charge, as the case may be.
(3)Entries in the register shall be authenticated by a director or the secretary of the company or any other person authorised by the Board for the purpose.
(4) The register of charges shall be preserved permanently and the instrument creating a charge or modification thereon shall be preserved for a period of eight years from the date of satisfaction of charge by the company.
Section 86(1) of the Companies Act, 2013 provides that
“The company shall be liable to a penalty of five lakh rupees and Every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.”
6. Having considered the facts and circumstances of the case and after taking into account the factors above, 1 hereby impose Rs. 5,00,000 (Rupees Five Lakh only) on company and penalty of Rs. 50,000/-(Rupees fifty thousand only) on each Director under section 86(1) of the Companies Act, 2013 for failure to make compliance of Section 85( 1) of the Companies Act, 2013 read with Rule 10 of Companies (Adjudication of Penalties) Rules, 2014. It is of this opinion that penalty is commensurate with the aforesaid failure committed by the Noticee.
The Noticee shall pay the amount of penalty by way of Demand Draft in favour of “Pay & Accounts Officer, Ministry of Corporate Affairs, New Delhi, payable at Delhi, within 90 days receipt of this order. The Demand Draft shall be forwarded to this office Address.
10. Appeal against this order may be filed in writing with the Regional Director (Northern Region), Ministry of Corporate Affairs, CGO Complex, Lodi Road, New Delhi, within a period of sixty days from the date of receipt of this order, in Form ADJ setting forth the grounds of appeal and shall be accompanied by a certified copy of this order. [Section 454(5) & 454(6) of the Act, read with Companies (Adjudication of Penalties) Rules, 20141.
11. Attention is also invited to section 454(8) of the Companies Act, 2013, in the event of non‑compliance of this order. In Case appeal is made 0/o Registrar of Companies, U.P maybe informed alongwith the penalty imposed & the payments made.
Registrar of Companies & Adjudicating Officer
Uttar Pradesh, Kanpur
NO.07/01/ADJ-85(1)/ HOLITECH INDIA PRIVATE LIMITED / 5454
1.M/s Holitech India Private Limited,
2. Mr. MANOJ KUMAR GAUTAM, 5455
3. CAI JIAWU, 5456
4. Mr. PENG GUO, 5457
5. Mr. JIN BO, 5458
6. ZHU HANJIAN, 5459
7. DIGVIJAY SINGH, 5460
8. TAIKUN WEN, 5461
9. XUAN XIAO, 5462
10. LUO FANGYONG, 5463
11. FUI SHIUNG YONG, 5464
12. NITIN RANA, 5465
Copy for information to:
HOLITECH INDIA PRIVATE LIMITED/5466
1. Regional Director, Northern Region, Ministry of Corporate Affairs, CGO Complex, Lodhi Road, New Delhi.